Software companies typically have to convince prospects to adopt new technologies based on their shared history, their service track record, and their ability to accurately predict and deliver real results that overcome the cost and friction of adopting new tools and methodologies. There are a number of lessons we draw on to help startups fostering technology adoption to attract their first paying customers.

I blogged about the challenge of advising entrepreneurs in mid-October. I thought I would try and capture it from the entrepreneur’s perspective: the challenge of integrating all of the (seemingly) contradictory advice they routinely get into an understanding of their own entrepreneurial journey. In my experience Josh Billings offers some of the best advice on navigating the entrepreneurial landscape: “It’s not the things we don’t know that get us into trouble, it’s the things we know that aren’t so.”

Back in the early 19th century, the arrival of such a carnival in a small town was a major occasion, affording the town’s residents the opportunity to sample all sorts of exotic attractions, from the grotesque denizens of the sideshow to wild beasts from Africa and Asia that many people at that time had only read of in books. The big draw at many of these shows was an elephant, a far bigger and stranger critter than any animal native to North America. […] So ritualized was this small-town pachyderm-mania that by about 1835 “to see the elephant” had become a catch phrase meaning “to experience all that there is to see, to see all that can be endured,” with the sense that after having “seen the elephant” there was nothing left to see. A related, more general sense arose a few years later, in which “to have seen the elephant” meant “to be worldly, no longer innocent, to have learned a hard lesson.” Many young people of the day who left the country for the big city with stars in their eyes only to experience hardship and disappointment were wryly said to have “seen the elephant” in this sense. And by about 1840, “see the elephant” had acquired the specialized military sense you have heard, meaning “to experience combat for the first time,” with the brutal loss of innocence that ordeal conveys.

So the challenge is to see things as they are, or to infer from others’ remarks how things work. But complex subjects admit of many perspectives, and like the Blind Men with the Elephant (or the Men in a Dark Room with the Elephant) each of us has a grasp on a different aspect of the subject.

I’ll begin with a Sufi story we’re all familiar with. It’s the story of the blind persons and the elephant. Recall that persons who were blind were each coming up with a different definition of what was ‘out there’ depending on what part of the elephant they were touching. Notice that the story depends on a storyteller, someone who can see that there is an elephant. What I’m going to propose today is that the storyteller is blind. There is no elephant. The storyteller doesn’t know what he or she is talking about.

One of the things our grandchildren will find quaintest about us is that we distinguish the digital from the real, the virtual from the real. In the future, that will become literally impossible. The distinction between cyberspace and that which isn’t cyberspace is going to be unimaginable. When I wrote Neuromancer in 1984, cyberspace already existed for some people, but they didn’t spend all their time there. So cyberspace was there, and we were here. Now cyberspace is here for a lot of us, and there has become any state of relative non-connectivity. There is where they don’t have Wi-Fi.

In a world of super-ubiquitous computing, you’re not gonna know when you’re on or when you’re off. You’re always going to be on, in some sort of blended-reality state. You only think about it when something goes wrong and it goes off. And then it’s a drag.

It could be that in Silicon Valley we are so surrounded by entrepreneurship that we can’t parse it. Like fish in water we can’t really see it until it’s suppressed. Another possibility is that there isn’t a single paradigm for entrepreneurship. An excerpt from “The Limitations of Scientific Truth” by Nigel Brush

Therefore, when a new paradigm is built upon the structure of the preceding paradigm, it is often difficult to show continuity; instead of representing quantitative increases in knowledge new paradigms are often little more than shifts in perspective. The process could be compared to the old baseball parks that had wooden fences around their outfields. People unable to afford a ticket into the park could still watch the game by looking through the knotholes in the fence. Each knothole, though, gave a different view of the playing field. A hole in the left field fence gave a good view of the left fielder and third base, but the center fielder might be completely out of sight. Each knothole in the fence provided the viewer with a different perspective of the game. Paradigms are somewhat akin to knotholes in that each gives only a limited view of the universe, never the whole picture.

Thanks for posting this – it’s awesome. I used Google Apps for Your Domain at Judy’s Book for email/calendaring/etc and I’m using it again for my new startup.

Looks like you’re fairly committed to Central Desktop, but perhaps Google Apps is worth it just for gmail.

Cheers,

Rahul

Rahul: we use GMail but found the Google Apps more languid than Central Desktop. It also lacks some key features compared to Central Desktop, in particular a real wiki style linking environment and an easy ability to clone a workspace. We use a lot of workspaces (for example for all of our clients, for workshop attendees, and for partners). This gets a lot of content and communication out of the inbox and into the wiki/workspace. Because we are typically working against a deadline in the workspace, the contention management features (which many other tools ignore) make it easy to avoid losing work or having to manually reconcile overlapping edits.

We are always interested in looking at new technology and open to upgrading, but we looked at a number of alternatives before consolidating onto Central Desktop for our workspaces. The two things we really need right now is a workspace that allows us to create content that is useful as a presentation (e.g. can output PowerPoint), can be used to create a document or workbook, and is also separate pages in a workspace. We find we need to present, hand out, and edit/update (typically in a collaborative fashion with clients/attendees) the same content. In edit/update mode it’s more useful to have the content burst into many pages, but we are then faced with turning it into a single document or slide deck.

Three tips for attending a trade show and scoping out breakthrough innovations:

Start on the perimeter and work you way in to the main floor. All the innovation is in the startups booths on the outside.

Before the show spend some time checking out exhibitors’ websites. Especially if you are not familiar with the company and believe it may be a new entrant. We build a spreadsheet with product, headquarters, funding etc.

Watch for interesting birds of the feather meetings. Often they will have the most interesting discussions of the whole show!

How do you plan when you are in a small software startup? Big company planning models are not just overkill, they are not appropriate for small firms. Startups need a lightweight planning and development model to thread the narrows between “just do it” and “let’s study the problem a little longer.”

We use an one-page planning model. The one-page business plan is different from traditional models. It’s an ACTION plan. Traditional models are out of date by the time they are finished! That’s one reason why they don’t work. They are also very general, trying to fit everyone, as a result are never really useful.

But a one-page model is not a vehicle for raising money or soliciting investment – that requires a different approach. This is an operating plan. The important thing here is the process of planning, developing a better understanding of the business and the options available.

Our answer is a series of twenty questions that will help you develop and refine your software product idea. See below for the first seven. We also cover these in our workshop Idea to Revenue, that gives you the time and tools to develop and leave with a one page plan.

Q1 What is the product or service?

What is the problem you solve?

What benefits do you offer?

Do you help save cost, save cycle time, save material, improve quality, reduce non-value-add people time?

Q2 Who is the customer? What is the size of the market?

Who is the buyer who makes the final decision? What are they responsible for ? How are they measured?

Who else has to approve or has influence?

Who actually uses it?

What kind of company, in what industry? Are there are other key attributes?

What pain, problem, or need does the buyer have? What problem do you solve?

What are the symptoms or characteristics to look for in a company that would indicate pain or a strong need?

Q3 What are the “must have” features? (Primary Buying Criteria)

What are basic features that you must have to participate in the market

What are differentiated (leadership) features that set you apart from existing solutions

What features do you need to minimize the switchover costs associated with using your offering: can they use your product or service in parallel with existing solutions and go back?

Q4 What are the “should have” features? (Secondary Buying Criteria)

What features would provide further differentiation but are not worth slipping the release for.

Ideally there are just a few “should have” features and these define what the develop team should focus on if they cannot assist with a must have feature.

Q5 What are the “nice to have” features? (Emerging Buying Criteria)

These are roadmap features that are clearly “below the line” for the current release but can be communicated to customers as part of a roadmap or statement of direction.

Ideally there are just a few key “nice to have” features and these define key elements of a roadmap.

These features should not be worked on unless the developer cannot in any way contribute to the “must have” or “should have” list.

Getting feedback after engaging with a client or even after an introductory meeting with a prospect is important. A couple of survey tools that we use are iContact and Survey Monkey. They are easy to use and low cost. Survey Monkey has some nice templates. The survey tools are useful when you want to ask the same fixed set of questions of several dozen to several hundred folks at once.

Here are our basic feedback survey questions:

To help us calibrate and improve our engagement model and the quality of our advice, please take a few minutes and answer three questions for us. Looking back on our conversation and e-mail exchange could you outline briefly (can be just one phrase or sentence)

The three most useful concepts or suggestions that you took away from our conversation or subsequent e-mail

The three least useful (or even worthless or counter-productive) concepts or suggestions that you heard in the interaction.

Up to three specific changes that you have made in your strategy or engagement process as a result of our interaction (again can just be a phrase or one sentence).

If we don’t get an answer we will typically have someone who had little or no involvement in the project call and follow up to ask the questions over the phone. Because they had little involvement in the project it’s unlikely that client will be dissatisfied with them personally and more likely to share feedback. In general the combination of a personal e-mail and a personal phone call will get you the most information.

e-News for Small Businesses is a free electronic mail service designed to provide tax information for small business owners and self-employed individuals. Subscribers receive information about important upcoming tax dates for SB/SE customers, what’s new for small businesses on the IRS Web site, reminders and tips to assist small businesses and self-employed taxpayers with tax compliance issues, IRS News Releases and special IRS announcements that pertain to SB/SE customers.

If you haven’t found an accountant for your business taxes now is the time to get your files in order and interview a few based on other business owner recommendations. If you are based in Silicon Valley and are interested in our advice, talk to Ogden Lilly at Boitano Sargent and Lilly.

Dharmesh Shah wrote a great post on his On Startups blog where he outlined 17 pithy suggestions for software startup co-founders. While I have picked what I think are the best half-dozen, preserving his original numbers. I would encourage you to read the full article.

1. Seek transparency and understanding with your partners early. Issues get harder as time passes

Here are some good rules of thumb I have picked up over the years on transparency:

Don’t have one person both write and sign a check. Always have one founder sign any check that represents a payment to another founder (never pay yourself company funds without having written authorization from another founder).

Use something simple like Quickbooks or Quickbooks on-line, take at least 30 minutes once a month to review financials.

One founder has to be CEO, agreement is always preferable to fiat, but deadlock never succeeds.

Never do a 50-50 split (remember that Packard had 60% and Hewlett 40%), if you want an even split select a tie-breaker board member and do 49-49-2 split so that any two represent a majority. Pick someone you both trust and respect. With three or more founders take care to arrange the equity distribution to avoid the possibility for deadlock, add a tie-breaker if needed.

Charles Caleb Colton observed that “A windmill is eternally at work to accomplish one end, although it shifts with every variation of the weathercock, and assumes ten different positions in a day.” If you are changing direction tactically that’s probably inevitable. But if you are changing some fundamental assumptions about your core competencies or the marketplace then you should be very explicit with yourself and the team that you’ve learned something. If you can’t build or retain a core team you may have a problem with your mission, your traction, or your ability to lead.

8. Until you are profitable, time is working against you. Once you are profitable, time is on your side.

Focus as much on the spend side–your “burn rate“–as you do on generating revenue. Expense growth should lag revenue growth. Revenue is important but bona fide references precede any significant revenue growth, and your early customers end up paying less for a product that almost works for a variety of reasons. It’s more important to have them pay something and turn them into a long term satisfied reference, than to focus purely on the revenue side.

11. Force yourself to write, as it will force you to think.

At different times I’ve kept a journal, an in-house blog, and written status reports to an informal set of advisors (or “kitchen cabinet“). For SKMurphy work, I find that my common development paths for written content is to answer someone in a e-mail, because it’s easiest for me to write with a specific audience in mind, and then re-purpose that into a blog entry if I find myself going back a second time and using it. If I send the URL for the post more than once or twice I think about either expanding the post into an article or aggregating a couple of posts into an article.

16. You choose your destiny, because you choose your team.

Hiring (and firing) decisions are the most difficult. In a small firm everyone is steering so be careful who else you select to sit in the pilot house. Your team aggregates social capital, intellectual capital, and normally a small amount of financial capital if you are bootstrapping. Collective focus and effective collective action translates this capital into results: put another way, if the results of teamwork are less than the sum of the individual efforts you are either not focused and pulling in the same direction or one or more of your team is doing negative work.

17. Be who you are. Do what you love. Join people you like.

This should be #1 on his list. It applies to whatever path you find yourself on.

“The more I heard that I couldn’t make it, the more I was determined to do it. I never liked being told that I’m not good enough to do this or that.” Archie Griffin

Entrepreneurs “need to be a little crazy” if you believe Barry Moltz. They get advice from well meaning friends and family that consists primarily of admonitions to stay on the beaten path: “Don’t quit your day job” or “Stay in school” to recall two, the latter normally a good idea (Bill Gates, Steve Jobs, and Michael Dell are convincing counter-examples but not a representative sample). But those friends are not normally entrepreneurs.

“I don’t take orders well,” says T.J. Rodgers, the founder, chairman and CEO of Cypress Semiconductor. “But taking advice from Larry Sonsini is easy. He’s professorial. He’s nonjudgmental. ‘You can choose to do this, you can choose to do that, and these will be the consequences.'”

It’s a sound approach when working with entrepreneurs: present likely consequences and the reasons why you believe that they will ensue.

Dharmesh Shah was complaining in July of this year that the customer is not always right and that “In most cases, our understanding is much higher than that of our customers.” He is selling to startup and small businesses who can’t figure out whether to accept his firm’s advice. He identifies four concerns that they may have that will prevent them from following his advice:

What’s in it for you?

Do you understand me?

Are you really an expert?

Did the expert make the call?

It’s a good blog post even though his frustration shows through a little too clearly. He offers two choices: you can be a “trusted advisor” (to borrow David Maister‘s phrase) or a “responsive assistant.” He closes with “Have you ever had to tell a customer they were wrong? How did you handle it?”

My answer follows, slightly amended from the comment I left on September 20 on his blog (and with formatting restored).

We offer strategic advice and business development consulting to early stage firms.

As such we fit your model of “trusted adviser” to entrepreneurs. In my experience it’s very difficult to tell an entrepreneur “you are wrong” (and have them listen and change their actions) because they hear this from so many of the folks around them (“get a real job”, “your idea will never work”, “no one else does it that way”,…) that they are no longer sure who to trust. In some instances this is like waving a red flag in front of a bull: we meet entrepreneurs who are more interested in proving someone else wrong (typically from their last company) than in building a company.

We work with them to estimate the likely future impacts of present decisions and understand the likely consequences. I find that a simple plan or decision tree can do more to illuminate the situation for an entrepreneurial team than any amount of telling. It’s normally the question that gets them to think through likely consequences that is more likely to change behavior than statements like “you’re wrong” or “this is a mistake.” Although we still try the other approach from time to time to see if it has started to work.

We also try and follow Russell Ackoff‘s “decision record” approach where we treat decisions as experiments and write down our hypotheses (“guesses” or “informed judgment” depending upon your perspective) about results in advance and then review them against measurable outcomes after enough time has passed.

True expertise means that you should be able to explain:

the symptoms you looked at,

symptoms you discarded as not germane,

the diagnosis you have reached,

the differential between the customer’s relevant symptoms and your diagnosis versus other potential diagnoses,

I think you also have to distinguish between decisions that are values conflicts (e.g. we want you to misrepresent a product or service to the point where you are knowingly committing a fraud) and decisions that are less than optimal, or may not necessarily get good results but are not in conflict with your values.

At the end of the day it’s still their company and it’s distinct from yours.

We are hosting a Peter Cohan event: “Create and Deliver Surprisingly Compelling Software Demonstrations” . Peter Cohan, a nationally recognized expert on software demo development who normally only consults to Fortune 500 firms. He offers only two “open enrollment” seminars every year that smaller companies can attend at a very reduced price, this one on Oct 13 is his last one for this year. He does offer shorter webinars on his methodology but this would be the last chance this year for a startup to get their demo critiqued by Peter.

This isn’t a sales pitch by Peter as he doesn’t ordinarily work with startups, this is very cost effective way for your software startup members to work on improving their demos based on a proven methodology and individual critique in a workshop setting.

As you are developing–and more importantly refining your presentation in response to feedback–you want to keep the following things in mind.

What criteria led you to select this prospect? Why did they agree to be your audience? Why do you believe, before you start your presentation, that they have a problem that your product addresses. Start out by confirming this before launching into a description of your solution.

How does the prospect describe the problem? Listen carefully to how they respond to your problem statement. Start with a description of a few key symptoms, as perceived by the prospect, before offering your diagnosis and prescription. Pay particular attention to how they describe the problem, if they substitute different terms to describe the problem, or restate it form an entirely different perspective. You are not there to win an argument over whose nomenclature is correct (the customer’s description has the right of way).

What data are they willing to share about the problem (and how they will know you have made it better)? As important as their verbal description of the problem, actual data that they are willing to share with you constitute the “facts on the ground.”

What is the next step? A serious prospect will be able to outline at a high level what’s involved in the evaluation and purchase of your product. At the same time you need to be prepared to outline the process you would like to follow. If the prospect says “This sounds great, how do we get started?” your answers are not “Cut us a check” or “No one has ever said yes before, we weren’t really expecting to have to answer that today.” Have your own plan of action prepared to be able to demonstrate real results even if, and especially if, this is your first real interested prospect.

Are You Wasting Their Time? People, especially in Silicon Valley, are much more willing to forgive you if your product doesn’t work as advertised on their problem (at least initially) than if you waste their time. If it’s clear it’s not a fit or you cannot help them today, politely cut the meeting short with a promise to return when you are confident you can help them.

Text Treatments: text logos are simple, the company name is always right there. Most high tech logos are text treatments, they are clear and simple. With text logos you have instant impact, customers don’t need to decipher anything. Another benefit of text treatments are logo aspect ratio comes naturally with words. They always seem to work whether you are shrinking or stretching them. Examples are Google, IBM, Intel, and eBay.

Icons: symbol logos can be recognized faster, our brains process images quickly than words alone. But they require more work and $$$ on branding and presence before people have the connection between symbol and company. Examples are Nike‘s swoosh, Apple‘s apple and Linux‘s penguin. Notice these logos have nothing to do with the companies product: they are about being different and being memorable. They are also very simple designs.

Keep it Simple: like many other types of design, the best logo designs are elegantly simple. They shrink, stretch, or twist without losing their intangible emotional resonance. Color may add to the design, but they still look great in black and white. In fact, most logo designers use grayscales to do the initial design, then move it to color. They have to look good on your business card, on literature, and on your website.

We’ve already blogged about how adding a logo to your business cards and website improves your credibility (and makes you more memorable), we used logoworks and were very pleased with the results.

The sales process may seem like a simple exchange – you convince a prospect to accept your product or service in exchange for their money. However, there are a number of overlapping processes running to get you to that point.

A few thoughts about one of them: the process that prospects go through to decide if they are going to buy from you. JerryWeissman has framed this as Understand, Believe, and Act.

First a prospect must understand what you have to offer. This is straightforward when your product is a better, faster, cheaper version. But this is much more difficult when it is an innovative technology. Demos and sales pitches become critical. We joke that “If you are looking for smarter prospects who will understand your offer, then maybe your demo sucks!” Sadly, this is often the case (we have even had to apply it to our pitches from time to time).

Presenting an innovative technology in a way that’s understandable to a prospect is never easy. The language, the problems, and why it is better must be grounded in the prospects world. If you give a prospect a feature list, some will be able to “get it”, but not many. To reach most prospects, you must start from a problem that they know they have, and offer a solution they can understand.

Secondly, prospects must believe that your innovative technology will actually deliver them the benefits you promise. New technology always brings risk. They may risk losing their job–or at least putting a “dent in their career”–if you don’t deliver! The first people who will trust you are folks with whom you already have a prior shared success. They know you can deliver. Usually these people are the source for your early sales. When your first clients say “I used it and it worked” to their friends they give you credibility. Eventually you must get to strangers referring other strangers to buy. Testimonials on your website are critical for prospects believing your claims. Testimonials, like your demo, must be in the language customers use and from people who are credible.

Only after they understand and believe will customers ever act. But they act on their own cycle, whether it’s a certain point in the product development process, a certain time of year, or a phase of the moon. It’s their timing! Your challenge is to make sure they remember your offering when they are looking for it. For this reason you need a method of reminding those people that you have a solution. We call this percolating. This is the function that applications like Salesforce provide: you can set up a sales campaign to remind you to contact everyone who is percolating every 6 weeks or so (or whenever they wanted to hear back from you next). Another method we have seen work well are newsletters. If you can help your prospect and send them something useful every 6 weeks, people will join the mailing list and remember you when they have a problem you can help them solve. Be there when they are ready to act.

I got a call from someone who asked me “you work with a lot of startups, what should I think about before joining a startup?” I asked him to clarify if they were asking him to come on as a co-founder or an employee and he said that they had funding and were looking to hire him as an early employee. He wanted to understand what were the key questions he should be asking about “position, compensation, exit strategy, layoff chances?” It was his first startup and while he was excited by romance he wanted to know what the practical realities of the marriage might look like.

My answer was that these were the first three questions he needed to be able to answer before digging into finances etc..

Do you like your boss and look forward to working for him?

Do you like your team and look forward to working with them?

Is the problem the firm is solving for it’s customers compelling for you to work on.

I advised him that these questions are no different than ones I would ask for any job. Picking who to found a company with probably changes #1 to “Have you worked with this person before and do you have confidence in his integrity and ability to deliver?” But I think two and three are the same. I told him that on a statistical basis the probability that you will get rich is very low, so make sure you are going to learn something, working with and for people you like and respect, and that the problem you are helping to solve is compelling for you.

Whether it’s a formal presentation, speech, sales pitch, seminar, jury summation, or a pep talk, every communication has as its goal to take the audience from where they are at the start of your presentation, which is Point A, and move them to your objective, which is Point B. This dynamic shift is persuasion.

[…]

In psychological terms, Point A is the inert place where your audience starts: uninformed, knowing little about you and your business; dubious, skeptical about your business and ready to question your claims; or in the worst-case scenario, resistant, mentally committed to a position contrary to what you’re asking them to do.

What you are asking them to do is Point B. The precise nature of Point B depends upon the particular persuasive situation you face. To reach Point B, you need to move the uninformed audience to understand, the dubious audience to believe, and the resistant audience to act in a particular way. In fact, understand, believe, and act are not three separate goals, but three stages in reaching a single, cumulative, ultimate goal. After all, the audience will not act as you want them to act if they don’t first understand your story and believe the message it conveys.

You can’t go wrong with Ogden Lilly at Boitano Sargent and Lilly. Odgen has done my taxes on the business side for more than a dozen years and helped on the personal side for some complicated returns. I have referred a number of folks to him over the years and always had good results, even when they were facing serious issues in an audit due to prior mistakes or poor practice.